The finance ministry on Saturday sought to allay the concerns of investors and industry over some of the Budget proposals like higher long-term capital gains tax on debt mutual funds and application of the general anti-avoidance rules (GAAR) from April 1, 2015.
Revenue Secretary Shaktikanta Das on Saturday suggested investors in debt mutual funds might not have to pay taxes retrospectively for units redeemed before this year’s Budget was presented. The Finance Bill 2014 has doubled the tax on debt mutual funds to 20 per cent. There was confusion over whether it would be applied to this year’s income.
“The effective date is assessment year 2015-16, that is income accruing during 2014-15. But let me clarify the intention is not to introduce any kind of retrospectivity,” Das said at a post-Budget meeting organised by the Federation of Indian Chambers of Commerce and Industry (Ficci).
Some Budget proposals that are to take effect retrospectively
Industry argues Finance Minister Arun Jaitley’s first Budget taxes in retrospect, despite an assurance to the contrary. Estimates of the retrospective tax on mutual funds add Rs 10,000-15,000 crore on redemptions in April-May.
“We will stand by the finance minister’s statement that no decision will be taken retrospectively. The Central Board of Direct Taxes (CBDT) will issue the necessary clarification,” Das said, adding the Rs 15,000-crore projection was an overestimation.
Das also said the government would soon decide whether GAAR — to be imposed on firms claiming tax benefit of over Rs 3 crore and designed to curb tax avoidance through offshore havens — should be introduced from its scheduled date of April 1, 2015. Minister of State for Finance Nirmala Sitharaman had on Friday only put forth the factual position in Parliament, he pointed out.
“GAAR is to come into effect from April 1 next year. The new government has not looked at the whole matter. It will examine and take a view. This will happen shortly. We are still eight months away from the deadline,” Das told reporters.
The Budget was growth-oriented, with several proposals to boost manufacturing, Economic Affairs Secretary Arvind Mayaram said at the Ficci meeting. He added the fiscal deficit target of 4.1 per cent of gross domestic product (GDP) would be met. “There are uncertainties, especially in the global situation. But as of now we are confident we will be able to manage it,” he said.
The government is looking at 5.4-5.9 per cent GDP growth this year. India’s growth slipped to below five per cent in the past two years, while the fiscal deficit was contained at 4.5 per cent in 2013-14.
Defending the Budget numbers, Mayaram said the government had unearthed Rs 12,000 crore locked up in small government funds and put them in the Consolidated Fund of India.
Department of Financial Services Secretary G S Sandhu said the government was examining mergers of public-sector banks and there would be some movement this year. He also said there was a proposal for an asset-reconstruction company where banks and power companies could come together to revive incomplete projects. The National Highways Authority of India had a similar proposal for the road sector, he added. “These projects can be completed, they can be put to commercial use and money can start flowing. That is another thing that we are looking at.”
|THE RETRO WORD|
‘Retrospective’, after all, may not be a bad word for the Narendra Modi govt. Though the govt had shown some resistance after taking charge, Union Budget 2014-15 has quite a few back-dated taxation and exemption provisions. A snapshot: